Income Tax Appellate Tribunal - Jaipur
Shankar Lal Kandoi, Jaipur vs Dcit, Jaipur on 27 January, 2017
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh HkkxpUn] ys[kk lnL; ,oa Jh dqy Hkkjr] U;kf;d lnL; ds le{k
BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM
vk;dj vihy la-@ITA No. 409/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2013-14.
Shri Shankar Lal Kandoi,
C-25, Amba Bari,
Jaipur.
cuke
Vs.
The Dy. Commissioner of Income Tax, Central Circle-3,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ADRPK 7465 M
vihykFkhZ@Appellant
izR;FkhZ@Respondent
vk;dj vihy la-@ITA No. 640/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2013-14.
The Dy. Commissioner of Income Tax, Central Circle-3,
Jaipur.
cuke
Vs.
Shri Shankar Lal Kandoi,
C-25, Amba Bari,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. ADRPK 7465 M
vihykFkhZ@Appellant
izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vijay Goyal (CA)
jktLo dh vksj ls@ Revenue by : Shri H.V. Gujjar (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 27.12.2016.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/01/2017.
vkns'k@ ORDER
PER SHRI KUL BHARAT, JM.
These two appeals by the assesee and revenue pertaining to assessment year 2013-14 are directed against the order of ld. CIT (Appeals)-4, Jaipur dated 23.03.2016. First, we take up assessee's appeal in ITA No. 409/JP/2016. The assessee has raised the following grounds of appeal :-
On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in confirming addition of Rs. 3,12,160/- made by AO on account of cash found at the time of search more so when the out of total cash of Rs. 5,77,160/- found by the search party, assessee has surrendered R. 2,65,000/- as his income for AY 2013-14 and balance of R. 3,12,160/- was explained by available cash balance in cash book of him and his family members.
On the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in confirming addition of R. 99,822/- (after allowing telescoping of Rs. 20,50,000/- against addition of Rs. 21,49,822/-) on account of entries in seized document page 3 of Annexure A-3, seized from the residence of the assessee for which the asessee explained to ld. AO that the entries in the impugned seized paper pertains to payments to various persons out of undisclosed cash of Rs. 20,50,000/- received by assessee from sales of his land which was separately surrendered in Income Tax return of the assessee and balance out of cash balance of assessee group.
2. Briefly stated the facts are that a search was conducted on 18.07.2012 in the case of Kandoi Group. During the course of search, various documents were found and seized. The original return of income was filed on 05.08.2013 declaring total income of Rs. 76,20,390/-. Subsequently, the case was taken up for scrutiny assessment and the assessment proceedings were framed under section 153A read with section 143(3)/153B of the Income Tax Act, 1961 (hereinafter referred to as the Act). While framing the assessment, the AO made additions on account of cash found from the residence amounting to Rs. 5,77,160/- and the income of Rs. 21,49,822/- admitted during search and was not offered for taxation in the return of income. Further, the AO also made addition of Rs. 15,00,000/- which was surrendered but not offered for taxation. Hence, the AO computed total income at Rs. 1,15,82,372/- against the income declared at Rs. 76,20,390/-. Aggrieved by this, the assessee preferred an appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal. While partly allowing the appeal, the ld. CIT (A) sustained the addition of Rs. 3,12,160/-, deleted the addition of Rs. 15,00,000/- and directed the AO to give benefit of telescoping in respect of the amount which was cash in hand of Rs. 20,50,000/-.
3. Aggrieved by the order of ld. CIT (A), both assessee and revenue are in appeal before this Tribunal.
4. The first ground of assessee's appeal is against confirmation of addition of Rs. 3,12,160/-.
4.1. The ld. Counsel for the assessee vehemently argued that the ld. CIT (A) was not justified in sustaining the addition. The ld. Counsel vehemently argued that both the authorities below have erred and acted contrary to the settled position of law. He submitted that the ld. CIT (A) ought not to have sustained the addition. The ld. Counsel has reiterated the submissions as made in the written submissions.
4.2. On the contrary, the ld. D/R supported the orders of the authorities below and submitted that there is no illegality in the order of ld. CIT (A) as assessee himself on oath has stated that the sum of Rs. 5,77,160/- is treated as undisclosed income and same would be declared in the year under appeal.
4.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The submissions of the assessee on this issue are as under :-
"During the course of search the search party found cash amounting to Rs. 5,77,160/- from the residence of the assessee. The copy of annexure-C is at PB Page No. 2.
2. During the course of assessment proceedings the assessee vide submission dated 25.01.2015 (Copy at PB Page 37) submitted the following explanation regarding cash found during search: -
1. Explanation regarding cash found during search During the course of search the department found cash from residence of assessee group. The detail of cash found during search is as under: -
S. No. Premises from where cash found Total Cash Found Surrendered in return Considered as explained Reason for considering explain
1.
Residence at C-25, Amba Bari, Jaipur 5,77,160 2,65,000 3,12,160 This much cash balance is available in books of accounts of assessee/his family members and business concerns Total 5,77,160 2,65,000 3,12,160 As on the date of search i.e. 18/07/2012 the cash balance in books of accounts of the assessee, its family members and group concerns was as under: -
S. No. Name of the person/concern Cash balance as on 18/07/2012 as per cash book Copy of cash book showing the cash balance as on 18/07/2012 is enclosed herewith at Page No.
1.
Shri Shankar Lal Kandoi (Regular Cash) (After making entry of additional income of Rs. 2,65,000/-) 149822 Debited to I.Tax and 80353.82 Balance as on 18/07/2012 2,30,176 47
2. Shri Shankar Lal Kandoi (Tejori a/c) 3,50,178 48-54 Total 5,80,354 The copies of cash books submitted to ld. AO during the course of assessment proceedings is at PB Page 47 to 54.
3. From examination of cash book your honour will found that the assessee has submitted the cash book of family members of assessee and business concerns as on the date of search as well as consolidate cash book prepared in the name of "Tijori a/c" for the transactions wherein the consolidate cash of entire family was used. The ld. Assessing officer examined these cash books and not found any defect in these books of accounts. Further the during the course of assessment proceedings of M/s Micro Metals, Singal Aromatics (Prop. Smt. Pushpa Kandoi) and Shri Yatesh Kandoi the cash balance appearing in their cash books as on the date of search has been accepted by ld. AO. The ld. AO not made any individual finding regarding submission of the assessee and rejected the same only for the reasons that the assessee has surrendered the same as his income.
4. The ld AO held that the assessee in answer to question no 9 has stated that there was no cash balance available at the time of search. The ld AO failed to appreciate the answer of the assessee in judicial perception. Firstly the answer was with regard to cash balance of the firms. Further he stated that as per books of the firms the cash balance should be Rs. 896000/- He withdrawn Rs. 1.00 lacs from Singhal Emporium's a/c and out of that he paid Rs. 9.5 lacs to Ankit. (Copy at PB pg 9). Further in answer to question no 7 & 8, he stated that cash lying at home is about Rs. 2.5 lacs to 3.00 lacs. (PB pg 8-9) . Regarding the income surrender during the course of search this is to submit that in reply to Q. No. 8 (Copy of PB Page 9) the assessee said that the cash belonging to his group concerns M/s Micro Metals and Singhal Aromatics is lying at home. In reply to Q. No. 9 of statement (Copy at PB Page 9) admittedly he said that no cash balance is available with his as on the date of search but the same is only with regard to cash balance of the firm. In this question, the search party asked question regarding cash balance of various firms of the group and after consulting the same with his accountant the assessee gave the reply of this question. No question was asked by the search party regarding cash balance available in the hands of individual and accordingly no answer was given in this regard. In Q. No. 10 (Page No. 9 of PB) the cash found during the course of search was surrendered because due to non availability of books of accounts at the time of search with the assessee, the assessee could not explain the cash found during the course of search.
5. The assessee has submitted the explanation regarding cash found at the time of search and claimed it as explained and furnished supporting evidence in support of his contention. The ld AO has not pointed out any defect therein, therefore the cash claimed to be as per books of accounts as on the date of search should be treated as explained.
6. In para 5.5 of the order the ld. AO mentioned that the surrounding circumstances also support the admission of the assessee. In this regard this is to submit that the ld. AO presuming that as on the date of search no cash balance was available with the assessee group and it is being treated as Nil. The assessee group is business family and running business concerns and for the day to day expenses of business as well as family the certain cash balance is required to be maintained, therefore there should have been some cash balance with the assessee group as on the date of search and the presumption that there is no cash balance with assessee group as on the date of search is wrong.
7. The entire addition and finding of ld. AO is purely on the basis of search statements of the assessee and the same is not bases on submission, details and evidences submitted before ld. AO at the time of search.
8. The income tax Act is specific Act and the assessment should not have been only on the basis of search statements but the due weighted should also be given on the explanation and documents submitted during the course of assessment proceedings and the documentary evidence cannot be rejected without pointing out any defect.
9. The Addition cannot be made merely on the basis of search statement
i) It is well settled principal of law that no addition can be made only on the basis of search statement more so when there are sufficient supporting evidence with assessee to prove his claim which has not been contradict. The department has no evidence/documents which prove that surrender in statement by assessee is correct, therefore the same cannot be rely.
ii) The Board of direct taxes issued instruction to the All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. vide letter F. No. 286/2/2003-IT (Inv) dated 10.03.2003 in regard of confiscatory statement in the course of search and seizer as under:
"Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders".
The Hon'ble Supreme Court in case of Tanna And Modi vs. CIT, 292 ITR 209 (SC) has held that a fortiori, clarificatory circulars issued by the Central Board of Direct Taxes may also be taken into consideration for the purpose of construction of the statute. The Hon'ble Supreme Court in case of Kerala State Industrial Dev. Corporation Ltd., 259 ITR 51 (SC) has also held that Finance Minister's speech before Parliament while introducing bill can be relied on to throw light on object and purpose of provisions. In case of Durgesh Oil Mills, 273 ITR 305 (All.), the Hon'ble Allahabad High Court has held that it is well settled that the circular issued by the Central Board of Direct Taxes is binding on authorities.
iii) Further Reliance is placed on the following decisions :-
Hon'ble Apex Court in the case of Pullangode Rubber Produce Co Ltd v/s State of Kerala & Anothers (1973) 91 ITR 18 (SC) has held that admission is an extremely important piece of evidence but it can't be said that it is conclusive. It is upon to the assessee to show that it is incorrect.
Hon'ble Rajasthan High Court in the case of CIT v/s Ashok Kumar Soni 291 ITR 172 (Raj.) has held that admission in statement during search is not conclusive proof of fact and can always be explained Addition merely on the basis of statement cannot be made. Reliance is placed on following decisions:-
CIT v/s G.Krishnan (1994) 210 ITR 707 Mad.
Held, that additions cannot be made merely on the basis of statements.
Gargidin Jwala Prasad v/s CIT (1974) 96 ITR 97 (All) Held, that the additions merely based on statement of witnesses cannot be made.
Chitra Devi v/s ACIT (2002) 28 Tax-world 454 (ITAT JP) No addition can be made in block assessment on the basis of statement recorded during the search unless it is relatable and connected with the material found during the search.
Jagdish Narain Ratan Kumar V/s ACIT 22 TW 209 (JP) Statement recorded during search are generally influenced by extraneous circumstances & cannot be termed as free from all ambiguity.
The Jodhpur ITAT Bench in Maheshwari Industries v. Asstt. CIT [2005] 148 Taxman 74 (Jodh) (Mag.) has held that additions should be considered on merits rather than on the basis of the fact that the amount was surrendered by the assessee. It is settled legal position that unless the provision of statute warrant or there is a necessary implication on reading of section that the principles of natural justice are excluded, the provision of section should be construed in manner incorporating principles of natural justice and quasi judicial bodies should generally read in the provision relevant section a requirement of giving a reasonable opportunity of being heard before an order is made which will have adverse civil consequences for parties effected.
Rajesh Jain Vs. DCIT 100 TTJ 929 (ITAT, Delhi 'A' Bench) Search and seizure - Block assessment - Retraction of statement - Addition of Rs.25 lacs made solely on the basis of confessional statement of assessee that he earned the said amount in the last ten years was not justified - Confessional statement should be corroborated with some material to show that assessment made is just and fair.
KRISHNA TERINE (P) LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX, ITAT, AHMEDABAD 'D' BENCH 56 DTR, ITAT 395 Held that it appears that both the additions have been made by the AO because the assessee in the statement under s. 132(4) of the IT Act made surrender of the above amounts but later on did not disclose the same in the return of income filed for the block period. However, on consideration of the orders of the authorities below, we are of the view that no evidence or material is discussed to show any incriminating material recovered during the course of search to make the above additions. The Tribunal in the first round of proceedings has already directed to examine the case on the basis of material seized, material available on record and books of account. In the absence of any specific findings as per the direction of the Tribunal dt. 31st May, 2005 and as per law for the block assessment noted above, before making the addition on the above issue the AO and the learned CIT(A) should have specified as to what material was found during the course of search to make the above additions. In the absence of any proper explanation and finding in the above grounds, we set aside the orders of the authorities below and restore these two grounds of appeal to the file of the AO with direction to re-decide both the grounds afresh on the basis of material seized, material available on record and the books of accounts as is directed by the Tribunal earlier vide order dt. 31st May, 2005 and in accordance with law for the block assessment as noted above.
The law relating to retraction is well-settled by Supreme Court in Sri Krishna V. Kurukshetra University, AIR 1976 SC 376, wherein it is held that if the original statement suffers from any defects, the person is entitled to go back on the statement already made by making correct statement. The Supreme Court have laid down the ratio, after considering S. 18 of the Evidence Act, 1872 that any admission made in the ignorance of the legal rights or under duress, cannot bind the maker of the admission. This right has been tested under Income-tax Act and the same has been upheld by Punjab & Haryana High Court in Kisan Lal Shivchand Rai v. CIT, (88 ITR 293).
Hon'ble ITAT Jaipur Bench in the case of Shri Pawan Lashkary ITA No 808/JP/2011 has held that income cannot be assessed merely on the basis of statement. Hon'ble ITAT has observed in Para 2.37 to 2.38 as under:-
"2.37 The revenue has relied upon the statement of the assessee recorded during the course of search in which the assessee surrendered the amount on account of revaluation of land as undisclosed income. Kelkar Panel studied the problem of confessions and surrenders during its studies and deliberations in para 3.27 and the same is reproduced as under:
''A cross section of people cutting across 4trade and industry complained of a high handed behaviour of raiding parties particularly while recording a statement. It was pointed out that overenthusiastic aiding parties would often coerce a 'surrender'. As a result all follow up investigations are distracted and generally brought to a stand still. Since the surrender is not backed by adequate evidence, the tax evader invariably retracts from the statement of surrender by which time it is too late for the Department to resume investigations. Similarly, where adequate evidence is indeed found, a surrender is not necessary to establish tax evasion. Therefore, the Task Force recommends that the CBDT must issue immediate instructions to the effect that no raiding party should obtain any surrender whatsoever. Where a tax payable desires to voluntarily make a disclosure, he should be advised to make so after the search. As a result, the taxpayer will not be able to allege coercion and successfully distract investigations. All cases where surrender is obtained during the course of the search in violation of the instructions of the CBDT, the leader of the raiding party should be subjected to 'vigilance enquiry. Further the task force also recommends that statements recorded during the search should be video recorded. This will indeed add to the confidence of the taxpayer in the impartiality of the system.'' 2.38 The Finance Minister in the budget speech for the year 2003 stated that no confession shall be obtained during search and seizure operation. The instructions were followed by CBDT by issue of a circular on the lines desired by the Finance Minister. There can be an estoppel on the issue of the facts but there cannot be estoppel on the principle of law. It is not the case of the revenue that the assessee was not disclosing the amount received as a result of retirement from the firm. The assessee obtained the legal advice and was of the opinion that such revaluation is capital receipt which is not liable to tax. Hence, we feel that income cannot be added simply on the basis of surrender. The statement recorded u/s 132(4) can be rebutted by the assessee and the case of the assessee is that the amount is not liable to tax."
The search party took the similar type surrender in the case of M/s Suresh Medical Agency, Shri Radhey Shyam Mittal, Shri Suresh Kumar Mittal and Shri Madan lal Mittal. In these cases without having any corroborative material, the ld AO made the addition in these cases merely on the basis of search statement. Hon'ble ITAT has deleted the addition in all these cases. The findings of Hon'ble ITAT in the case of Shri Radhey Shyam Mittal are produced as under:-
"We have heard parties with reference to material on record and case laws brought to our notice. The action under section 132 was carried out at assessee's premises on 27.8.2008 and in the statement assessee made surrender of income of Rs. 30,00,000/- on account of income earned from trading of items in pharmaceutical business outside the books. The appellant, however, had been approaching the authorized officer to provide copy of statement so obtained in proceedings under section 132 of the Act. When these statements were not provided, the appellant vide letter dated 3.10.2008 addressed to the authorized officer and another letter dated 18.12.2008 addressed to the assessing authority requested to provide the copy of statement in case the same were to be used against him. Till such time the copy of statement was not provided, assessee entertained a bonafide belief that in the absence of any documentary evidence or corroborative evidence having been found as a result of search, such statement would not be used against him. If such statements were to be used, the department was under legal obligation to have provided the copy thereof to the appellant. It is only on persistent efforts of the appellant, copies of statement were provided only on 13.3.2009. The appellant after understanding the legal implication of such statement made a valid retraction as the surrender was not supported by any corroborative evidence. The affidavit filed in this regard is laid on assessee's paper book pages 64 to 68. This affidavit has carefully been perused. After the affidavit was filed before the assessing authority, he remained silent on the face of it and carried no enquiry thereon to verify the correctness thereof. The assessee was also not cross examined on the point of retraction nor was required to produce any documentary evidence or any other evidence. Assessee was, therefore, entitled to assume that the income tax authorities were satisfied with the affidavit as sufficient on this point. The Hon'ble Allahabad High Court in the case of Sohan Lal Gupta vs. CIT (1958) 33 ITR 786 (All.), as also put to the parties during the course of argument, has made elaborate discussion on the evidentiary value of the affidavit. The relevant passage from the aforesaid judgment at page 791 of the report is reproduced as under :-
" The most important points on which the Tribunal relied, is that mentioned at No. 2, viz., that, according to the Tribunal, the assessee had not satisfactorily established that the shares had to be sold as the purchaser of the Jaswant Sugar Mills was not willing to purchase that mill unless the shares in the Straw Board Mills Ltd. held by the family were also transferred to him at the same time. On this point, the only material available on the record is the affidavit which was filed by the assessee before the Income-tax Officer. The assessee in his affidavit, had definitely stated that the purchaser wanted to purchase both the going concerns, the Jaswant Sugar Mills and the Straw Board Mills Ltd., together and one of his conditions of purchase was that all the shares of Lala Jaswant Rai, his sons and other relatives had to be transferred to the purchaser. The Income-tax Appellate Tribunal rejected this affidavit of the assessee on the mere ground that there was no documentary evidence in corroboration in the form of any correspondence of otherwise on this point. Shri G.S. Pathak contended rightly before us that the Tribunal was not entitled to reject the affidavit on this point on such a ground. After the assessee had filed the affidavit, he was neither cross-examined on that point, nor was he called upon to produce any documentary evidence. Consequently, the assessee was entitled to assume that the Income-tax authorities were satisfied with the affidavit as sufficient proof on this point. If it was not to be accepted as a sufficient proof either by the Income-tax Officer or by the Appellate Assistant Commissioner of Income-tax or by the Income-tax Appellate Tribunal, the assessee should have been called upon to produce documentary evidence, or, at least he should have been cross-examined to find out how far his assertions in the affidavit were correct."
(emphasis supplied) The reliance placed by the assessee on the judgment by Hon'ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. (supra) and Hon'ble Rajasthan High Court in the case of Ashok Kumar Soni (supra) are well placed as the assessee has successfully demonstrated that the admission made during the course of search is not correct. The ingredient for retraction of statement made during the search, therefore, stand duly satisfied as the assessee is found to have made retraction within a reasonable time immediately after the copies of statement were provided to him. Furthermore, there being no material or evidence on record to show that appellant has carried any business outside the books for sale and purchase of items of pharmaceutical companies that could give rise to income to the extent of Rs. 30,00,000/-, addition merely on the basis of such statement which stood validly retracted could not have been made. On similar basis and reasoning in the case of Suresh Medical Agency another assessee of the group who were also searched on the same day along with this appellant, vide our order dated 21.8.2013 in ITA No. 443/JP/2012 have found the retraction made as valid and also deleted the addition. We, therefore, find no factual or legal justification in sustenance of addition by Ld. CIT (A) in this regard. As a result, the addition sustained by Ld. CIT (A) is deleted and ground no. 1 raised in appeal is allowed.
10. The case laws relied on by ld. AO are not applicable in the case of the assessee because the claim of the assessee is backed with supporting evidences which has not been proved by ld. AO as erroneous.
In view of above this is to submit that the additions of Rs. 3,12,160/- was made by the assessing officer deserve to be deleted. "
However, the ld. CIT (A) decided the issue on the basis that the submissions are afterthought. The case of the assessee is that whatever stated during the course of search cannot be treated as the concluding evidence. He submitted that if the assessee is able to demonstrate that what is stated in the statement is not correct but the correct fact is disclosed in the return of income in that event addition should not be made on the basis of such statement. We are in agreement to the extent that mere statement during the course of search would not be sufficient to make addition. In the present case, a sum of Rs. 5,77,160/- was found from the residence of the assessee. In the statement the assessee stated that he is unable to explain the source. He stated that the same be treated as undisclosed which could be offered for taxation. However, before the AO, the assessee offered a sum of Rs. 2,65,000/- as undisclosed income and stated that the balance cash is as per re-casted book. The submissions of the assessee before this Tribunal is that a sum of Rs. 5,77,160/- was found from the residence at C-25, Amba Bari, Jaipur. He submitted that the cash balance as on 18.07.2012 as per books of account of the assessee and his family members of the group concern was Rs. 2,30,176/- (Regular cash) and Rs. 3,50,178/- as Shankar Lal Kandoi (Tejori a/c). The cash books were submitted before the AO during the course of assessment proceedings and drew our attention to paper book pages 47 to 54 wherein the assessee has enclosed cash book pertaining to Shankar Lal Kandoi and others related concerns. Both the authorities below have not accepted the explanation solely on the basis that the assessee himself has stated in his statement during the course of search that this amount represents undisclosed income. In our considered view, this approach is not as per the settled law. In our view, if the assessee is in a position to explain the cash found during the course of search in his return of income and there is sufficient evidence in support of the same, such evidence cannot be discarded merely on the ground that the assessee had stated during the course of search that such amount represented undisclosed income. In the present case, the authorities below have not rebutted the evidences in the form of cash book submitted by the assessee by any contrary evidence. Therefore, the action of the authorities below in making addition is not justified. Same is hereby deleted. This ground of the assessee's appeal is allowed.
5. Ground No. 2 of the assessee relates to confirming the addition of Rs. 99,822/- and Ground No. 1 of the Revenue relates to confirming the deletion of addition of Rs. 20,50,000/- by allowing telescoping benefit of income declared.
6. The ld. Counsel for the assessee submitted that the ld. CIT (A) was not justified in sustaining the addition of Rs. 99,822/- and reiterated the submission as made in the written submission as under :-
"During the course of search, the search party seized a paper market at Page No. 3 of Annexure A-3 (Copy at PB Page No. 16). This paper consist the noting of payments made to various persons on various dates or cash balance of group of assessee placed in attachi.
2. The noting on this page was made by wife of the assessee relating to payments made by her to various persons out of cash given by assessee or cash placed with her in Attachi (Tijori) out of cash given by assessee. The payments noted in this slip was made out of undisclosed cash of Rs. 20,50,000/- received by assessee from sales of his land at Jatawali which is duly shown in Income Tax return of the assessee or out of cash balance of assessee group. The entries of this paper are recorded in Tijori a/c maintained in books of accounts of Shri Shankar lal Kandoi. The copy of such ledger a/c is enclosed at PB No. 48.
3. From examination of Tijori a/c your honour will find that the entire transactions mention on the paper under question is duly recorded in books of accounts of the assessee and the same proves that the assessee group was having sufficient funds wherefrom the payments recorded on this paper has been made. The ld. AO did not found any defect in the detail submitted by the assessee and not made any individual finding regarding submission of the assessee and rejected the same only for the reasons that the assessee has surrendered the same as his income.
4. During the course of search the department also found a Page No. 10 of Annexure A-10 (Copy at PB Page 59) and this paper shows that the assessee received cash amounting to Rs. 20,50,000/- against land sold during the year which has been taken into consideration while computing the capital gain on sales of this land. The otherwise use of this much cash was not proved by the department. Therefore the claim of the assessee that this cash balance was utilized for given advances to various persons as recorded on this paper cannot be denied. The copy of submission and relevant documents submitted regarding this papers are at PB Page 55 to 58. The balance payment was made out of cash balance with assessee group and the same is duly recorded in books of accounts of the assessee. Further in this paper the entries of Rs. 3,00,000/- are in the name of "Attachi" and the same is noting of cash placed by wife of assessee in Attachi (Tijori) out of cash given by assessee. Since this is not outflow of the cash, therefore no addition of this amount can be made in the income of the assessee.
5. The ld. AO submitted that no evidence regarding recording of entries on this papers in books of accounts has been furnished by the assessee. In this regard this is to submit that along with submission dated 25.01.2015 the assessee submitted the copy of "Tijori a/c" showing the entries of transactions recorded on this paper, therefore the ld. AO is wrong is holding that no evidence in this regard has been submitted.
6. Since the assessee has submitted the explanation regarding source of cash payments recorded on this paper and no defects were pointed by ld. AO therein, therefore the explanation submitted by the assessee should have been accepted.
7. The entire addition and finding of ld. AO is purely on the basis of search statements of the assessee and the same is not bases on submission, details and evidences submitted before ld. AO at the time of search.
8. The income tax Act is specific Act and the assessment should not have been only on the basis of search statements but the due weighted should also be given on the explanation and documents submitted during the course of assessment proceedings if no any defects has been found therein.
9. The Addition cannot be made merely on the basis of search statement. The reliance in this regard is made on the various judgments mention in para 9 of submission made for Ground No. 1 above.
10. Further, this paper shows utilization of funds. The assessee has surrendered undisclosed income on income basis therefore, telescoping of the utilization of funds against the undisclosed income surrendered should be given. If the assessee receives undisclosed income from sale of land, than there would also be utilization of this extra income. The income (receipts) and utilization (payments) both cannot be taxed otherwise it would be tantamount of double taxation.
Reliance is placed on the following decisions:-
Ananthram Veera Singhaiah & Co Vs CIT [1980] 123 ITR 457 (SC), CIT Vs Thyarya Mal Bal Chand [1987] 165 ITR 453 (Raj.).
3) CIT Vs Jawanmal Gemaji Gandhi 151 ITR 353 (Bom) In view of above this is to submit that the additions of Rs. 21,49,822/- made by the assessing officer deserve to be deleted."
6.1. On the contrary, ld. D/R supported the order of AO and submitted that the ld. CIT (A) was not justified in deleting the addition of Rs. 20,50,000/- made on account of undisclosed sale of land. The ld. D/R submitted that assessee himself has admitted in the statement that the amount is undisclosed.
6.2. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT (A) has decided the issue in para 3.2.2 of his order by giving a finding of fact. The aforesaid finding of fact given by ld. CIT (A) is neither controverted by the assessee nor by the revenue by placing any contrary material on record. Therefore, we find no reason to interfere into the order of ld. CIT (A), the same is upheld. The ground of the assessee as well as of the revenue are dismissed.
7. In the result, appeal of the assessee is partly allowed.
ITA No. 640/JP/2016 (Revenue) :8. The ground raised by the revenue are as under :-
Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 20,50,000/- made on account of undisclosed sale of land ignoring the fact that assessee himself surrendered in the statement recorded during search proceedings.
Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 15,00,000/- made on account of undisclosed income ignoring the fact that assessee himself surrendered in the statement recorded during search proceedings.
9. Ground no. 1 of the revenue, we have discussed and decided along with assessee's ground no. 2 thereby dismissing the ground of the revenue.
10. Now we take revenue's ground no. 2, the ld. D/R submitted that the ld. CIT (A) is not justified in deleting the addition. He supported the order of the AO.
10.1. On the contrary, the ld. Counsel for the assessee supported the order of the ld. CIT (A). The ld. Counsel reiterated the submissions as made in the written brief as under :-
" The assessee relies on the findings of ld CIT(A).
2. During the course of search proceedings, Annexure A-1 to A-4 seized from residence of the assessee and the explanation of each and every paper was submitted by the assessee. (PB pg 39-44) The income of the basis of these documents was surrendered by the assessee and in case the explanation given by the assessee has not been found acceptable to the AO, he made the separate additions.
3. No other discrepancies has been pointed by ld. AO in the seized papers which shows the income over and above to whatever already surrendered by assessee or already added by ld. AO.
4. As regard to additional income of Rs. 15,00,000/- surrendered during the course of search this is to submit that the same was surrender in Q. No. 23 of the statement (PB Page 14) and from the reading of the statements, your honour will find that the income of Rs. 15,00,000/- was surrendered in search statement over and above to separate surrender on issue base and this surrender was tentatively to cover up the possible errors and just to buy peace. There surrender is not based on any specific transactions or documents.
5. Since in the Income Tax return due consideration has been taken on all the unrecorded transactions and the necessary income has been shown in return filed, therefore no separate addition can be made on the basis of tentative surrender made by the assessee.
6. The entire addition and finding of ld. AO is purely on the basis of search statements of the assessee and the same is not backed with any corroborative evidence, therefore no addition should have been made on this a/c.
7. The income tax Act is specific Act and the assessment should not have been only on the basis of search statements. The income cannot be assessed on any contract between assessee and department. If some erroneous or baseless surrender has been made by the assessee the same is not valid in the eyes of the law.
8. The Addition cannot be made merely on the basis of search statement. The reliance in this regard is made on the various judgments mention in submission made for Ground No. 1 above.
Humble assessee prays your honor kindly to delete the additions confirmed by ld CIT(A) and sustain the order of ld CIT(A) in respect to the additions deleted by him and allow the appeal filed by assessee and dismiss the appeal filed by the revenue."
10.2. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The ld. CIT (A) has decided the issue by observing as under :-
" 3.3.2. I have duly considered assesee's submission and carefully gone through assessment order passed by the AO. Here AO has added this amount to the total income of the assessee on the basis of sworn statement recorded on oath u/s 132(4) of the Act. In the sworn statement recorded on oath u/s 132(4) of the Act, assessee had made voluntary disclosure of Rs. 1,85,60,982/- (based on seized documents and assets inventorized) and to buy mental peace, further made a voluntary disclosure of Rs. 15,00,000/- to cover up various loose ends/defects. For the sake of clarity, relevant extracts of Q. No. 22, 23 & 24 of the sworn statement recorded u/s 132(4) of the Act on 19/07/2012 is reproduced as under :-
iz-22 eSa vkils vuqjks/k djrk gwWa fd vki vkids }kjk fn;sa x, leLr c;ku dks i<+dj fofHkUu iz'uksa ds mRrjksa esa v?kksf'kr vk; gksuk Lohdkj fd;k gS] mUgsa iqu% C;kSjkokj o.kZu djsa\ mRrj eSaus mijksDr c;ku iz- 1 ls 21 rd i<+ fy;s gS vkSj eS bl fu'd'kZ ij igwWapk gwWa fd eSus fuEu v?kksf'kr vk; gksuk Lohdkj fd;k gS %& ¼v½ iz'u la-10 v?kksf'kr udnh isVs & :i;sa 5]77]160@& ¼c½ iz'u la-17 On money for land & :i;sa 7]62]000@& ¼l½ iz'u la-18 Cash Advance Banna Lal & :i;sa 10]00]000@& ¼n½ iz'u la-19 Cash Advance Nannu Ram& :i;sa 25]00]000@& ¼;½ iz'u la-13 Undisclosed cash Payments& :i;sa 21]49]822@& ¼j½ iz'u la-21 Undisclosed Jewellery & :i;sa 1]00]00]000@& ;gkWa eSa vkidks ;g crkuk pkgwWaxk fd Åij bafxr ¼c½ esa tks :i;s 7]62]000@& dh v?kksf'kr vk; n'kkZ;h gS og 4 ch?kk 2 fcLok ds okLrs fn;k x;kA Out of books cash payment gS tc dh eq>s vc ;kn vk jgk gS fd tkVkoyh rg- pkSew ftyk t;iqj esa mijksDr ds vykok 2 ch?kk tehu vkSj Hkh Fkh ftldh ckcr~ ¼731000 x2½ $ 11000 = 1572000@& dk fuos'k out of books fd;k x;k FkkA vr% eSa Åij n'kkZ;h xbZ ¼v½ ls ¼j½ rd ds vykok 15]72]000@& fo- o'kZ 2011&12 gsrw vk;dj gsrw lefiZr djrk gwWa] bl ij eSa vk; fu;ekuqlkj pqdk nwWaxkA ,oa vk;dj fooj.kh nkf[ky dj nwWaxkA iz-23 vki }kjk Åij fy[ks c;kuksa ds vuqlkj dqy :i;sa 1]85]60]982@& dh v?kksf'kr vk; Lohdkj dh gSA D;k blds vfrfjDr vki ryk'kh ds nkSjku ik;sa x;s documents ds laca/k esa dqN vkSj Li'V djuk pkgrs gS\ mRrj vkids }kjk Annex A-1 to A-4 tks eq>s fn[kk;sa x;s gSa mudk voyksdu djus ls ,slk izrhr gksrk gS fd buesa fofHkUu O;olkf;d ysu nsu dk C;kSjk ntZ gS rFkk ;g laHko gS fd buesa cgqr lh izfof'V;kWa fu;fer ys[kk iqLrdksa esa ntZ gksus ls jg xbZ gS ,slh fLFkfr ds pyrs eSa mijksDr ds vfrfjDr esjh Hkwyo'k ntZ gksus jg xbZA vk; ds isVs ,oa esjs eu dh 'kkafr gsrw :i;s 15 yk[k vfrfjDr vk; djkjksi.k gsrw lefiZr djrk gwWaA bl izdkj dqy 2]00]60]982@& eSusa djkjksi.k gsrw mijksDr c;kuksa esa lefiZr fd;sa ftl ij eS fu;ekuqlkj dj tek dj nwWaxkA ;g vk; mijksDr of.kZr rF;ksa ,oa esjs eu dh 'kkafr ds fy, lefiZr fd;sag S rFkk eSusa jktdh; dk;Z esa iw.kZ lg;ksx fd;k gS vr% eSa vis{kk djrk gWwa fd esjs ekeys esa fdlh izdkj dh 'kkfLr dh dk;Zokgh ugh dh tk,WaA iz-24 D;k vki mijksDr ds vfrfjDr dqN dguk pkgrs gS\ mRrj gkWa eSa ;g dguk pkgrk gwWa fd eSusa :i;s 2 djksM+ 60 gtkj 982 ¼2]00]60]982@&½ viuh v?kksf'kr vk; dj gsrw lefiZr dh gS ftl ij fu;ekuqlkj dj nsus gsrw izfrc} gwWA d`i;k eq> ij dksbZ 'kkfLr dh dk;Zokgh ugh dh tk,WA mijksDr c;ku eSusa iw.kZ gks'k gokl esa LosPNkk ls rFkk fcuk fdlh ncko ds fn;sa] ftUgsa ns[kdj i<+dj le> fy, gSA blds ckn gLrk{kj fd;sa gSa rFkk bu c;kuksa ls eSa iw.kZr% lger gwWa] bZ'oj esjh enn djsa-----------^^ Further on perusal of written submission made before the AO on 25.01.2015, it is seen that assessee had made surrender during the search operation as well as offered the same for tax in his return of income for AY 2013-14 as under :-
Head under which undisclosed income surrendered/income declared in ITR Amount surrendered Details of Income-tax Returns filed Name of assessee A.Y. Income declared Advance/payments to various persons as per pg 3 of Annexure A-3.
Rs.21,49,822/-
Shankar Lal Kandoi
-
0.00 Investment in land at Jatwali 7,00,000 Shankar Lal Kandoi 12-13 10,55,000 Advance Payment for land to Banna Lal Sharma as per page no. 26 of Annexure A-4 10,00,000 Shankar Lal Kandoi 13-14 10,00,000 Advance payment for land to Nanu Ram Sharma as per page no. 27 of Annexure A-4 25,00,000 Shankar Lal Kandoi 13-14 25,00,000 Excess Jewellery* 1,00,00,000 Shankar Lal Kandoi 13-14 27,61,265 Excess Cash found 5,77,160 Shankar Lal Kandoi 13-14 2,65,000 Investment in land at Jatwali 15,72,000 Shankar Lal Kandoi 12-13 15,72,000 Other income surrendered on protective basis 15,00,000 Shankar Lal Kandoi
-
0.00 Capital gain on sales of land at Jatawali 0.00 Shankar Lal Kandoi 13-14 20,50,000 Total 2,00,60,982 1,12,13,265 *Note surrender on a/c of investment in gold in the return filed and paid taxes.
It is a fact that AO has made the addition of Rs. 15,00,000/- purely on the basis of admission made by assessee in the sworn statement and AO has also not pointed out any missing entries in the seized documents or defect in assessee's submission. Further, AO has also not on careful perusal of the answer to Q. No. 23, it is seen that assessee had admitted Rs. 15,00,000/- on a/c of any missing entries in the seized document Annexure A-1 to A-4. There is no dispute regarding the evidentiary value of the sworn statement made & recorded u/s 132(4) of the Act during the search operation. In this case, all additions hinge on the documentary evidences gathered during the search operation. Therefore, any addition made on protective basis in absence of any documentary evidence or corroborative evidence cannot be sustained in the eye of law, accordingly, addition made of Rs. 15 lakhs is hereby deleted. Asessee's appeal in Gr No. 4 succeeds."
The above finding of fact is not controverted by the Revenue by placing any contrary material on record. We therefore, do not find any reason to interfere in the order of ld. CIT (A). Same is hereby upheld. The ground of the revenue is dismissed.
11. In the result, assessee's appeal in ITA No. 409/JP/2016 is partly allowed whereas revenue's appeal in ITA No. 640/JP/2016 is dismissed.
Order is pronounced in the open court on 27.01.2017.
Sd/- Sd/-
( HkkxpUn ½ ( dqy Hkkjr)
( BHAGCHAND) ( KUL BHARAT )
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 27/01/2017.
Das/
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. The Appellant- Shri Shankar Lal Kandoi, Jaipur.
2. The Respondent -The DCIT, Central Circle-3, Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 409 & 640/JP/2016)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@ Assistant. Registrar
22
ITA No. 409 & 640/JP/2016
Shri Shankar Lal Kandoi, Jaipur.